Argonaut Social Studies
Chapter 13, Section 3 Study Guide
Economics: Three Types of Economies
Traditional, Command and Market Economies
Pages 363-369
Introduction~ What are the three basic types of economies?
traditional, command and market economies
Why are there economies in the first place?
so society can organize production, distribution and consumption of goods and services
Traditional Economies~ What is a traditional economy? an economy based upon how things have run for
generations........by tradition. Often, these are tribal cultures.
Why do some societies still use a traditional economic system?
 because that economic system have kept the people fed and happy for many,
many years
 there is no reason to use another economic system
What to produce? is often determined by what is available such as game and crops that have
always been produced
How to produce? by traditional tools, weapons, farming techniques
Who gets what is produced? that is decided by tradition also....often the village elders or
men determine who gets what
Who owns the resources? people own their own tools, tents, weapons etc.......but what is
produced and who gets it is determined by tradition and customs
Why are traditional economies normally small? traditional economies cannot support large
populations
Where are traditional economies located in the world? South and Central America, Asia and
Africa (if you read this, you just won a +5 coupon......grats for paying attention)
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Command Economies~ What is a command economy? most important economic decisions are made by
the government...........communism
Under a command economy, what does the government control?
most everything: what is produced, how much it costs, where people work and how much
they make, who gets the goods produced....consumers have very little power
When did command economies originate? Ancient Egypt and Mesopotamia...the rulers
would run the economy
Government Decision
Who makes most economic decisions under a command economy?
Making~
a central government committee or the dictator
How much choice and power do the average consumers have?
very little....
Who gets what?
that depends...if you're and important person........you'll get more
Market Economies~ What is a market economy?
people own the factors of production such as land, factories, and businesses
What is the "market" of the market economy?
whenever a seller and buyer agree on a price of a good or service such as you buying a pair of
shoes or hiring a plumber to fix a leak
What role does the government have under a market economy? very little..mostly to keep
things fair, resolve disputes and control precious resources
Decision Making
Who makes most of the economic decisions under a market economy?
by Individuals~
consumer demand (what they want) drives everything, producers meet that demand
Competition~
Workers compete for jobs, businesses compete for your money
Profit Seeking~
What is profit? money made from making a product and selling that product
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How does profit motivate people in the market economy?
everyone wants more stuff.......that what drives people in a market economy, you
work harder........you make more money.........you get more stuff!!!!!
Free Enterprise and
What is free enterprise?
Capitalism~
people in a market economy are free to make economic decisions without
government interference
What is capitalism? people, not the government, choose how to use their capital to
make goods and services and make money
Modern Day Economics~ What is a "mixed economy?" an economy with a part of the three economies:
traditional, command and market, combined
Examples: China and the Soviet Union~ What type of economy did China and the SU have?
command.........communist!
How did China and the Soviet Union change? they added free enterprise and privately
owned companies........now they are mixed with lots of government control
Examples: The United States~ Why is the United States considered a mixed economy? We are mostly a
market economy, but still have a good amount of government control
8.7.4 Describe characteristics of the basic economic systems.
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traditional economy
- economic decisions based on custom and historical precedent
- people often perform the same type of work as their parents and grandparents
command economy
- centrally planned economy
- central ownership of property/resources, usually by government
- lack of consumer choice
free market economy- individual choice
- consumer demand drives what is produced
- profit motive
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
- competition
- private ownership of property/resources
- minimal government involvement in the economy
no country relies solely on markets
8.7.5 Describe the characteristics of a mixed-market economy.
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individuals and businesses as owners and decision makers in the private sector
government as owner and decision maker for public sector
greater government role than in a free-market economy and less than in a command economy
most economies today (including the United States) are mixed economies
8.7.6 Describe the characteristics of the United States economy.
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markets generally operate without undue interference from the government
prices are determined by supply and demand
private property
profit
competition
consumer demand drives what is produced
government involvement is limited
most decisions regarding production of goods and services are made in the private sector (private businesses)
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